By David Keligian on 5/21/2013 2:28 PM
The end of 2012 was a tumultuous time for estate planning. No one—Congress, planners, or clients—knew anything for certain other than the high estate and gift tax exemption might (and temporarily did) go away at the end of 2012.

Congress and the administration soon agreed that for 2013, both the estate and gift tax exemptions would be “permanently” set at $5,250,000, with inflation adjustments. Some people who rushed into 2012 planning may have thought that the rush was unnecessary. Those who procrastinated breathed a sigh of relief, thinking they could wait to do their planning.

President Obama’s fiscal year 2014 budget illustrates how uncertain the situation remains, and how quickly the rules for estate planning can again change. While budgets represent something of a “wish list” for different types of tax increases, there are several key points about the 2014 budget.

First, President Obama has proposed returning the 2018 estate tax rates to the 2009 levels—estate and gift tax rates...
By David Keligian on 8/30/2012 11:43 AM
Everyone (especially us at Brown & Streza) is encouraging their wealthy clients to make use of the $5,120,000 per person gift tax exemption which will automatically revert to $1,000,000 at the end of this year. However, some wealthy clients are concerned that even if they have $20 million or $30 million dollars of wealth, gifting $10,240,000 may be too radical a step. They may be concerned about parting with the cash flow generated by the gifted assets.

An excellent solution is an irrevocable gift made by each spouse, in trust to the other. The benefits to this planning, which must be completed before the end of this year, are:

1. First, assuming no “fraudulent conveyance”, the assets in each irrevocable trust enjoy the strongest creditor protection available under California law. 2. Both spouses have made maximum use of available gift tax credits that are probably the highest we’ll ever see. The trusts are drafted so that the gifted assets are excluded from both husband and wife’s estate...
By David Brown on 3/7/2012 4:07 PM
When an estate is in excess of the Unified Credit, gifting assets is a good way to avoid future estate taxes.

A Qualified Personal Residence Trust (QPRT) is one of the best tools to use because it is so simple.

While we still have a $5,000,000 exemption we should all be encouraging our clients to make gifts this year, assuming it is a taxable estate.

Here are a few of the characteristics of a QPRT:

1. Transfer the home or homes (a couple is allowed to transfer up to 4) at a significant DISCOUNT. 2. The gift FREEZES the value at the discounted gift value, so if the home appreciates by the time the client dies all of the appreciation is out of the estate. 3. While the client is living they still live in the home just like they always did. 4. If they are married there is no “rent” due at the end of the “term” unless they want to pay rent. Some couples like the idea of paying rent to the kids after the term as a further means to help the kids and reduce the estate tax. Many...
By David Keligian on 1/31/2012 3:55 PM
The IRS recently won a court argument allowing it to summons property transfer records from the California State Board of Equalization. The IRS is searching for unreported taxable gifts. This move, like so many others by the IRS and the Franchise Tax Board, are parts of ongoing attempts to grab the lowest hanging fruit on the tree to bring in more tax revenue.

Especially in Southern California, many parents end up providing assistance to their children with home purchases. They sometimes take joint title to homes to help their children qualify for loans, or take sole title to the home then transfer title to the children at some future point.

Right now, the IRS appears to be looking at people who transferred real property for no consideration to children and grandchildren from January 1, 2005 through December 31, 2010. However, in estate tax audits, we’ve seen auditors go back through all of someone’s recorded property transfers (sometimes for more than 20 years) attempting to find transfers of...